Liquefied natural gas rates

Rates for transporting liquefied natural gas (LNG) are regulated by the Federal Energy Regulatory Commission (FERC). The Natural Gas Act ("NGA"; 15 U.S.C. § 717) imposes requirements for those rates. NGA § 3(e)(4) states that FERC-approved projects “shall not result in subsidization of expansion capacity by existing customers, degradation of service to existing customers, or undue discrimination against existing customers as to their terms or conditions of service at the facility.” The critical element in reviewing rate design, particularly incremental rates, is to ensure that there is a proper assignment of costs and that the respective shippers pay for the service they receive and the project can proceed without subsidies from the pipeline’s existing customers.